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Electronic Negotiation With Drug Distributors Brings Lower Prices for Chemotherapy Drugs

Electronic Negotiation With Drug Distributors Brings Lower Prices for Chemotherapy Drugs

ABSTRACT: Rising costs, evolving markets, and tighter regulatory conditions are challenging the way community oncologists purchase drugs. OneOncology, Inc., an innovative new healthcare technology company, simplifies the time-consuming process of procuring oncology products. Cancer Care & Economics (CC&E) recently spoke with the company's founder and chief executive officer, M. Steven Kirchof, a nationally known expert in community cancer care.

CC&E: What was the impetus for starting OneOncology?

MR. KIRCHOF: Community oncologists treat more than 85% of US cancer patients. The average practice is about 2.8 doctors with a staff-to-physician ratio of 6 to 1, and each oncologist in a community setting purchases approximately $2.0 to $2.5 million in drugs per year. Because of restrictive policies enacted in the Medicare Modernization Act (MMA), many of these practices, where drugs make up about 70% of their expense structure, are under very severe financial stress. Quite simply, the current marketplace fit the need for our service.

CC&E: In a nutshell, please describe the service your company provides.

MR. KIRCHOF: We're an electronic trading hub that brings together oncology practices and pharmaceutical oncology drug distributors in a marketplace using real-time reverse auction technology that we have customized specifically for community oncology.

Our technology allows community oncology practices to strengthen the health of their practice and the overall oncology community by increasing the efficiency of their drug purchasing while maintaining complete control over the treatments and drug formularies they want to use.

CC&E: How do you reduce the administrative burden of drug procurement?

MR. KIRCHOF: In today's environment, the community oncology practice typically shops for drugs on Monday morning. Quite a few literally get on the telephone and shop the distributors for the lowest prices in the country and essentially cherry pick the drugs and then ask for that price from their current distributor. We dramatically reduce the time and labor of that process by using the electronic marketplace; we drive the price down to the lowest in the market and achieve that equilibrium for our customers. An electronic market results in dynamic pricing: The price for the item being auctioned changes instantaneously because of the electronic format. As practices observe the price changing in real time, the price will continue to fall until a rational market price is established. A 1% decrease in drug price results in about a15% improvement to the bottom line.

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